MUMBAI: Cost pressures in its relatively smaller Viscose Staple Fibre or VSF division certainly seem to be telling on Grasim Industries which only partially benefited from strong cement realisations on a y-o-y basis in the quarter to March 12. As a result, the company's consolidated operating profit margin fell 340 basis points y-o-y to 22.1% in the fourth quarter, while net sales rose 12.4% in the quarter. The results of the March 12 quarter are not strictly comparable with a year earlier.

Going forward, in its cement division and the broader sector, demand is expected to weaken with the monsoon expected to set in over the next few weeks. Cement prices typically weaken during the monsoon season. This comes at a time when input costs are still at elevated levels.

For Grasim, input costs still remain high in its VSF division. Apart from that, with no signs of easing in the Euro Zone crisis and its impact on a key user industry for the VSF division- the global textile industry, the outlook for this division remains hazy in the near-term, say analysts.

Nevertheless, the stock trades at a consolidated P/E of nearly 8.2 times on a trailing four-quarter basis and appears reasonably valued.